New Iranian Submarine Threat Could Send Oil to $200 a Barrel

You might wonder how the media – and, more to the point, the oil markets – have missed an important story like this.

On Aug. 8, Iran announced over its state-run airwaves that four new submarines were added to its fleet. But very little has been said about the potential havoc this technological advance could allow the Iranians to play with the world oil markets.

However, on CNBC’s Aug. 9 broadcast of “Street Signs,” CNBC contributor John Kilduff, vice president and co-head of MF Global, warned that with this new threat that could endanger the Strait of Hormuz – a major oil shipping point – $200-a-barrell oil is quite possible.

“It’s the mother of all oil supply choke points,” Kilduff said. “There’s just no two ways about it. Really, it’s a pick your number. But I think $200 a barrel, given that we’re $80 now, you get an easy double. And, then another 20 percent on top of that gets you to $200. It sounds, well it is horrific. It would be dislocative to the global economy. But it’s certainly within the realm of possibilities. And you know, it really feels like it’s just a matter of time here before something happens within that strait. As you pointed out and were discussing there, it’s only two one-mile wide shipping lanes. So it’s easily blocked by various parties. Not just the Iranians.”

Another report had surfaced that a Japanese oil tanker had suffered damage from a terrorist attack, which “Street Signs” anchor Erin Burnett pointed out. The report underscored the vulnerability of energy markets so dependent on a volatile and vital region of the globe.